Cloud services and a changing workplace

Cloud services can play an important role in reviving the UK's flagging economy, but to what extent will the technology reshape business practices – and what will it cost?

Cloud services allow employees to work
from any connected location (main
image); how the technology will change
the way we live and work was discussed
at a recent seminar. Photograph: lightkey/Getty Images/Vetta

Two of the most pressing issues facing the UK today are public sector efficiency and reinvigorating the small and medium enterprise sector. "Both of these things can benefit from cloud-based infrastructure and software models," said analyst Jeremiah Caron.

Caron was speaking last month at a seminar, hosted by the Guardian in association with Huawei, on the role of the cloud in the information economy. "Adoption of cloudbased computing is still relatively low, but growing rapidly," he added. According to his company's 2011 survey of 1,000 businesses worldwide, 63% of companies say that the cloud meets less than 5% of its IT needs, but the survey also shows that cloud usage is expected to double within two years and to continue growing.

"The cloud is one of the most overhyped things I've seen," said Caron, "but sometimes hype is there for a reason.

There are very good reasons why people are paying so much attention."

That said, there is a twist. The single thing most wanted by companies adopting cloud solutions is a reduction in costs, but "a lot of businesses are going to be unpleasantly surprised", Caron said. "There may not be a direct cost saving." Any improvement on the bottom line will only come indirectly, through increased efficiency, and not because paying a cloud provider is necessarily cheaper than supporting internal IT infrastructure, he said.

Lukas Oberhuber, chief technology officer at insurance broker Simply Business, said his company is moving heavily into the cloud. "Services in the cloud are a no-brainer," he said. "If we can take services that work in the way we want them to, that makes total sense."

If cloud take-up is slow, it is because "existing IT teams are focused on services they already have in place," Oberhuber said. "I cannot imagine a company starting today that would have an Exchange server in their datacentre. They are going to go to Google Apps or Office 365.

"There is an unstoppable feeling about cloud hosting. It is going to happen. The IT department may not want it, there may be concerns about security, but it is just so compelling."

Thinking big

Huawei's head of enterprise research and development, John Roese, told the seminar we are thinking too small. Cloud used to be a synonym for the internet, but no longer. "Companies like Amazon and others, without any malicious intent, coopted that term. They changed "cloud" into meaning a virtualised datacentre.

That's underwhelming if we think of this massive inflection that's going to change our industry."

Roese uses storage as an example.

Today, we think of cloud storage as scalable but expensive storage on the internet, but that is missing the point. "If you look at what Google and Amazon have done internally, it's a radical rethinking of storage. It rips out Raid [disk-based storage technology], it moves to a software model that's scalable. They've effectively made storage infinitely scalable and free. The enterprise hasn't begun to touch that yet."

Storage, he says, is an example of where IT vendors hold back in order to protect their market. "The vendor community had little incentive to build something that was an order of magnitude cheaper per unit and essentially destroyed their industry. Inevitably though, the technology exists and we're going to see a revolution in storage."

Roese believes that a similar revolution will affect other aspects of computing. "In the next five years we will virtualise everything," he said, including CPUs, media, analytic, and graphics processors, until the virtualised internet is a pool of resources.

"Why would you build an analytics farm for a bank, that most of the time operates at 2% capacity, when you can offload those services into a virtualised internet?"

In addition, the world is going mobile.

"Instead of thinking about fixed users accessing the services, we're going to find that it is the mobile user that accesses them. We can have full functionality on an iPad though most of the functionality lives in the cloud, with services that are virtualised and extended so that tablet is a window into cloud services," he said.

Such a future presumes that the network can keep up with the demand. Can it? Stephen Unger is a group director at Ofcom, the independent regulator responsible for the UK communications industries. "There are three ways to increase the capacity of our mobile infrastructure," he told the seminar audience. "You can provide more spectrum. You can increase the spectral efficiency, the bits per hertz. Or you can build many more cells [sites where antennas are based]. We published a document six months ago about our long-term strategy in the UK, and said that we need to make progress on all three.

"We need to increase the efficiency with which we use spectrum by a factor of about five. We need to increase the number of cell sites by perhaps a factor of 20, by which I mean not base stations but a range of small cell technologies. The third part is that we need to get more spectrum out there, six to 10 times as much as is currently available." Most of that additional spectrum will be at high frequencies, but some will be at low frequencies such as the 700 MHz band, which is currently used in the US for mobile data.

Derek White, the chief customer experience officer at Barclays, says that the cloud and consumerisation of technology are changing everything, as consumers come to expect instant results from their mobile devices, for actions such as booking flights or holidays. The impact of this kind of engagement is shaking up the financial services industry in a similar way to how the internet transformed other sectors, he said. "We are right in the throes of what happened to the music industry, the book industry, the video industry."

White described Pingit, a mobile money platform created by Barclays in response to this trend. "It is the ability for consumers and businesses to exchange money using a telephone number as a proxy … it is instant and it is free. We sometimes refer to it as a digital ATM." Using Pingit, anyone can transfer money provided they have a mobile connection, he said.

The cloud lowers the cost of entering a new market for a small business, while for an enterprise such as Barclays it reduces the cycle time for innovations. "When we first outlined the plan for Pingit, we were delivered a plan that said it would take between two and two and a half years to implement. From concept to execution, Pingit took us seven months. The cloud played a role in enabling us to collapse that cycle time," he explained.

The panel went on to look at barriers to cloud adoption. Security is often cited, but is it an issue? Roese believes that portability [the ability to work across different clouds] is a greater barrier. "In general, almost every security issue that we find in the cloud is solvable if we handle it rationally," he said, though acknowledging that there is work to do.

"Portability is more complex; it's less about technology and more about politics and the market. We think there is an imperative in the industry to settle on standardised interfaces. There should be no more of this rubbish where people think they can differentiate based on proprietary interfaces in the cloud," Roese said. "A lot of suppliers are not very interested in this because they lose the stickiness of the solution, but we will not see massive cloud adoption without that portability."

Other issues that the panel and audience felt could hinder cloud adoption were human inertia, fear of the unknown and loss of control.

A question from the audience touched on another sensitive issue, the UK's Data Protection Act. This is not part of Ofcom's responsibility but Unger did comment on the regulatory issues raised by the cloud, remarking that data protection is essential for consumer protection as well as trust and that data portability is essential for competition. "The most basic point is that it is not a UK-specific issue," he said.

"You don't even know where the data is. There are very fundamental questions about data protection and data portability. It is a completely new set of challenges."